Alibaba sets new Singles Day sales record but stock took a hammering

Alibaba’s USD74.1 billion Singles Day sales record was overshadowed by a near 10% stock plunge caused by China’s proposed new anti-trust regulation.

The ecommerce giant said its gross merchandise value (GMV), a figure which shows the total value of orders across Alibaba’s shopping platforms, surpassed RMB498.2 billion (USD74.1 billion) as compared to RMB268.4 billion recorded last year in a 24-hour period on Singles Day.

Despite the massive figures recorded, Alibaba’s share price plunged by 10% due to the Chinese government new proposed anti-trust regulations.

On Tuesday 10th, Alibaba’s US-listed shares closed down over 8% at USD266.54, wiping off over USD60 billion of value in a day. The Chinese technology giant’s Hong Kong-listed stock shed 9.8% to close at HKD248.40 on Wednesday 11th.

The State Administration for Market Regulation released draft rules citing what constitutes anti-competitive behavior. It covers areas including pricing, payment methods, use of data to target shoppers.

In a note, Morgan Stanley analysts said the potential implementation of  new anti-trust regulations is negative for most major Internet companies, particularly in ecommerce and food delivery – although competition has already intensified with reduced market dominance across segments in recent years, which could be a mitigant.

This year’s Singles Day is set against the global Covid-19 pandemic which has crippled the world economy. However, in China where the pandemic appears to be under control, the economy has begun to recover. This sales event also gives indication the strength of the Chinese consumer spending.

Alibaba is expecting imported goods to be a big hit with Chinese shoppers as fewer are travelling overseas to buy foreign products. Tmall, a shopping platform fun by Alibaba, has brought more than 2,600 new overseas brands to China for the first time.

The technology giant has been making a push into the lower tier Chinese cities where ecommerce penetration is lower and spending power is weaker. The company feels this is key to strong growth moving forward.

In general, a senior analyst from Forrester said, “It has been a strategy for Alibaba to drive growth for a few years and especially when there is a strong competitor like Pinduoduo that attracts consumers in lower tier cities who are more price-sensitive,” cited from CNBC.

To counter the rise of Pinduoduo, Alibaba launched Taobao Tejia, an app which carries massive discounts on products all year round and the technology giant also was redirecting people from its main Taobao app to this discount app as well. It is a move aimed at consumers in lower tier cities.